IRS releases guidance on tax issues relating to same-sex married couples

The Internal Revenue Service (IRS) has released guidance that, for all federal tax purposes, treats same-sex couples who were legally married in jurisdictions that recognize their marriages no differently from opposite-sex married couples. The guidance, which comes in the form of Revenue Ruling 2013-17 and Answers to Frequently Asked Questions (FAQs), will apply regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriages.

The new guidance implements the June 2013 decision reached by the U.S. Supreme Court, which concluded that the 1996 Defense of Marriage Act’s definition of “marriage”—between a man and a woman—is unconstitutional. The IRS’s guidance applies to all federal tax provisions where marriage is a factor, including employee benefits. The ruling also clearly states that, for federal tax purposes, “marriage” does not include registered domestic partnerships, civil unions, or other similar formal relationships, regardless of whether the individuals in such relationships are of the opposite sex or the same sex.

The IRS’s ruling provides guidance on filing a 2013 individual federal income tax return, filing amended returns for tax years that remain open under the statute of limitations (generally, 2012, 2011, and 2010), and claiming amounts paid for their same-sex spouse’s health insurance as a pretax, rather than after-tax, item.

For employee benefit plan sponsors and administrators, the IRS intends to issue separate guidance on filing refund claims for payroll taxes paid. The agency also will provide guidance on how cafeteria and qualified retirement plans should treat same-sex spouses for periods before September 16, 2013, the application date of the newly released ruling, as well as plan amendment requirements and any necessary corrections. In the meantime, the IRS’s FAQs indicate that employers may file a claim for a refund for the Social Security and Medicare taxes paid on health insurance premiums that employees paid on an after-tax basis for their same-sex spouse.

For additional information about applying the IRS’s guidance to employer-sponsored benefit programs, please contact your Milliman consultant.

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